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Hart v. Bentley Laboratories

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


August 18, 2010

CHARLES HART, JR., PLAINTIFF-RESPONDENT,
v.
BENTLEY LABORATORIES, L.L.C., DEFENDANT-APPELLANT.

On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, L-5681-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued April 19, 2010

Before Judges Rodríguez, Reisner and Yannotti.

Bentley Laboratories, L.L.C., (Bentley) appeals from a February 5, 2009 judgment following a jury trial, in favor of its former independent sales representative, Charles Hart, Jr. The judgment awarded $49,944 in compensatory damages, $5,492.55 in prejudgment interest, and $77,419.50 in counsel fees, pursuant to the Sales Representatives' Rights Act (SRRA), N.J.S.A. 2A:61A-1 to -8. Bentley also appeals from the dismissal of its counterclaim against Hart at the close of all evidence. We affirm the dismissal of the counterclaim and the awards of compensatory damages and prejudgment interest, but reverse the award of counsel fees.

This a summary of the relevant evidence. Bentley manufactures liquid and cream products for private label brands in the cosmetics industry on a contract basis. Brian Fitzpatrick was Bentley's president. Hart agreed to become one of Bentley's sales representatives. Per industry standard, the proposed compensation arrangement was that Hart would pay his own expenses and receive his commissions after Bentley was paid by the customer. However, Fitzpatrick testified that "[Hart] kept saying to me, you know, this is my only source of income, I'm totally going to be representing Bentley . . . there's nothing else, no other way for me to get any money or achieve any income outside of Bentley." Hart requested health care benefits. Because Fitzpatrick believed that Hart "was going to be working exclusively and dedicated to us," he "was certainly willing then to contribute to [Hart's] personal cash flow so that the arrangement could work." As "a significant concession," Fitzpatrick agreed to pay Hart on the purchase orders, rather than when Bentley was paid, but Fitzpatrick "wanted to be sure that it was real clear" that this would be renegotiated after twelve months. Fitzpatrick also agreed to pay for Hart's health insurance. Hart and Fitzpatrick signed a contract, which allowed either party to revoke the agreement "at any time upon a 30 day written notice." At trial, Hart insisted that the contract was not an exclusive arrangement and that he remained an independent contractor, permitted to sell other companies' products. He said he would not have signed the agreement if it had been exclusive.

Fitzpatrick and Hart created a list of companies to ensure that none of Hart's accounts would be pursued by Bentley's other sales representatives and vice versa. The list was attached to the contract between Bentley and Hart as "Exhibit A." Included on Exhibit A was a company called CCA Industries (CCA). After Bentley provided CCA with samples it had created for CCA's products, it received purchase orders from CCA for five or six products.

Several months later, Hart asked Fitzpatrick if he would "mind" if Hart facilitated a transaction for a company that manufactured a product Bentley did not produce. Fitzpatrick objected because he believed "it would divert [Hart's] time and attention from our business." According to Fitzpatrick, Hart agreed.

Fitzpatrick testified that, "the arrangement" between Hart and Bentley worked "very, very well" and he was "very happy." Hart agreed. He earned $88,000 in commissions the first year. At Hart's one-year anniversary, he and Fitzpatrick began to modify the contract for renewal. They agreed that commissions would be paid ten days after shipment of the product. Hart asked to remove any provision for business expenses, because he intended to incorporate as a limited liability corporation and wished to take advantage of available deductions. Fitzpatrick agreed. Fitzpatrick testified that he repeatedly presented the written contract for Hart's signature, but Hart wanted his attorney to review it. According to Hart, the new contract was never signed because he disagreed with several of the terms. Nonetheless, the changes were implemented effective July 1, 2004, without a signed contract.

In September 2004, Bentley's corporate headquarters received a request for a quote for products for CCA's Denise Austin cosmetic line. Dana Weiss, CCA's purchasing director, testified that he sent the request to Hart's attention based on CCA's "understanding that he was a representative of [Bentley's]." Bentley submitted its quotes through Hart. The bid was "pretty significant" to Bentley. CCA indicated that the product line "was going to be very fast track," with a launch scheduled for the first quarter of 2005. At trial, Hart testified that there was "no way" that Bentley had the "capacity" to do the entire job under those time constraints.

Hart delivered hard copies of Bentley's quotes to CCA. When Fitzpatrick asked Hart about the status of the bid, Hart said that CCA was "still waiting to get other bids in." However, Fitzpatrick learned from Hart "sometime in early January" that Bentley did not get the business. Hart mentioned another company called "RMJ" and told Fitzpatrick that "they just took it on price."

In fact, unknown to Fitzpatrick, Hart also had a signed contract with CCA that would compensate him for his representation of the Denise Austin line. According to Hart, Drew Edell, CCA's owner, had asked him to find a manufacturer for CCA's "entire line" of Denise Austin cosmetics. On January 3, 2005, Hart signed a contract with CCA that compensated him for a deal he made for Medicia, a direct competitor of Bentley's, to manufacture some of the Denise Austin products. At trial, Edell denied Hart's claim that CCA had asked Hart "to shop around the quotes for the Denise Austin line." Rather, Edell testified that Hart had approached CCA and offered to facilitate a relationship between CCA and Medicia. Hart told Edell that he "was no longer representing Bentley and [was] acting on an independent [basis]."

David Del Pizzo, vice-president of sales for Medicia, testified that Hart contacted him in the summer of 2004 to ask if Del Pizzo would "be interested" if Hart were able to bring "some CCA business to Medicia." Hart told Del Pizzo that he represented CCA "as a broker." Del Pizzo refused Hart's "numerous" requests to be compensated by Medicia, because Hart admitted to Del Pizzo that he was being compensated by CCA. However, Hart assisted Medicia in its bid. Medicia sent Hart its quote for the Denise Austin line at Hart's Bentley e-mail address. Soon afterward, Hart notified Del Pizzo that Medicia was the successful bidder for two of the Denise Austin products. Medicia's quotes on those products were higher than Bentley's.

Hart and Fitzpatrick met at Bentley's office on February 9, 2005. At trial Hart and Fitzpatrick offered very divergent views of the meeting. Hart testified that he never notified Fitzpatrick that he was terminating their contract. Fitzpatrick testified that he told Hart, "[Y]ou're obviously unhappy here . . . . What is it you want . . . [what] would [you] like to see happen with the business relationship?" Hart's answer to that was, "I want to end it." But according to Fitzpatrick, Hart "wasn't actually resigning at that meeting." Hart asked about his commissions. Fitzpatrick told him that he would not be entitled to any if he resigned. He told Hart, "[Y]ou think about what you want to do and I'll think about, from our perspective[,] what we could do in terms of some kind of a compensation. And let's circle back in a day or two." Fitzpatrick said that Hart resigned in a telephone conversation on February 12, 2005, and at that time he again denied that he intended to work for a competitor.

On February 14, 2005, Fitzpatrick emailed Hart a proposal, which the email said was made "[i]n light of our mutual decision to terminate our business relationship." Bentley would pay Hart's commissions for twelve months on products shipped for the customers defined in Exhibit A. But the proposal required Hart to agree "not to solicit or do business in any manner whatsoever" with CCA for the twelve-month period that Hart would be receiving commissions from Bentley. At the time, CCA was Bentley's only existing customer procured by Hart. Fitzpatrick testified that he "didn't have a problem" if Hart eventually decided he had to work for a competitor, but he "didn't want to be writing [Hart] a check on [a client] account that he would then take from us and . . . move it to somebody else." At the time, Fitzpatrick "had no knowledge" of Hart's arrangement with CCA. Hart rejected the offer.

On March 8, 2005, Bentley paid Hart all of his commissions for orders prior to February 9, 2005. Sometime between March and May 2005, Fitzpatrick learned that Medicia had obtained the contract to manufacture the Denise Austin cosmetic line. He was "shocked," "outraged," and "felt completely betrayed." Fitzpatrick calculated that Bentley's damages from the lost Denise Austin account was $103,576, based on the potential gross revenue for each item.

Hart sued Bentley alleging breach of sales commission contract and breach of the covenant of good faith and fair dealing. Hart alleged that Bentley breached its contract with him when it terminated him and failed to pay post-termination commissions. Hart sought compensatory damages and an accounting.

Bentley answered and counterclaimed for: breach of implied covenant of good faith and fair dealing; breach of contract; tortious interference with economic advantage; and misappropriation of trade secrets. Bentley alleged that Hart breached his duty by surreptitiously assisting one of Bentley's competitors to win a manufacturing contract on which Bentley also was bidding.

At the close of all evidence, the judge granted Hart's motion to dismiss Bentley's counterclaim. The judge found that Bentley failed to present evidence to establish with reasonable certainty that Bentley's bid would have been successful absent Hart's conduct. In short, the judge found that Bentley's claim for damages was "purely speculative" and that Bentley also failed to show that it had mitigated its damages. The judge told the jury that Bentley's "counterclaim for damages" had "been resolved" and that the jury should not speculate as to the outcome of the resolution or its reasons.

During deliberations, the jury asked: "Is breaching a contract the same as terminating a contract?" The judge told the jury "no," but he also said that under the express or implied terms of the contract, "[n]either of the parties was permitted . . . to terminate the contract" or "bring the agreement to an end." He also told the jury that the contract provided that Bentley would pay Hart commissions for twelve months if Bentley terminated it, but if Hart terminated the contract, he would be due no "post termination commissions." The judge also explained that a breach of contract consisted of a failure to perform a contract according to its express or implied terms and that a material breach by Hart "would constitute a lawful basis for Bentley to avoid payment of commissions to . . . Hart." The jury decided that Bentley had terminated the contract and that Hart had breached his contract with Bentley, but that the breach was not material.

After the jury's verdict, Hart moved for attorneys' fees pursuant to the SRRA. In a written opinion, the judge rejected Bentley's argument that Hart failed to assert the claim in his complaint and awarded attorneys' fees. Bentley appeals.

Dismissal Of Counterclaim

Bentley argues that the judge erred by dismissing its counterclaim. We disagree.

At the close of evidence on a claim, the adverse party may move for dismissal on the basis that the claimant has failed to establish the right to relief. R. 4:37-2(b) and -3. The trial court must "accept[] as true all the evidence which supports the position of the [proponent of the claim] and accord[] [the proponent] the benefit of all inferences which can reasonably and legitimately be deduced therefrom." Dolson v. Anastasia, 55 N.J. 2, 5 (1969). If, in applying this standard, "reasonable minds could differ" on the outcome, the motion must be denied. Ibid. The judicial function in considering such a motion "is quite a mechanical one" that "is not concerned with the worth, nature[,] or extent (beyond a scintilla) of the evidence, but only with its existence, viewed most favorably to the party opposing the motion." Id. at 5-6.

All three counts of the counterclaim require that Bentley establish that it was damaged as a result of Hart's actions. See Coyle v. Englander's, 199 N.J. Super. 212, 223 (App. Div. 1985) (requiring damages caused by breaching party's actions in breach of contract actions); Lamorte Burns & Co., Inc. v. Walters, 167 N.J. 285, 305-06 (2001) (requiring loss that is "direct result" of another's actions in tortious interference actions); Model Jury Charge (Civil), 4.10J, "Implied Terms --Covenant of Good Faith and Fair Dealing" (2009) (requiring "injury, damage, loss[,] or harm" caused by another in breach of implied covenant of good faith and fair dealing actions). We conclude, applying these standards, and after a careful review of the evidence, that Bentley has failed to show any damages or loss of an expected economic advantage, or any injury, loss, or harm that precluded Bentley from realizing the benefits of the contract. In fact Bentley's claim for lost profits is too speculative to submit to a jury. Bentley did not present evidence beyond a "scintilla," Dolson, supra, 55 N.J. at 5-6, to allow its claims to proceed to a jury on the basis that it was reasonably probable that Bentley would have been awarded the Denise Austin contract absent Hart's interference. There is no proof that Hart's undoubtedly duplicitous conduct affected CCA's award of the contract to Medicia. The fact that Medicia got the contract and that Hart assisted in the process does not, without any other evidence, prove that but for Hart's conduct Bentley would have been awarded the contract. The evidence sheds no light on why CCA chose to award the contract to Medicia and not Bentley.

Bentley argues that the wrongful dismissal of its counterclaims prejudiced its ability to defend against Hart's claims because the jury instructions led the jury to believe that Bentley's counterclaim had been resolved against it thus, Hart's breach was not material. We reject this argument because it is based on speculation of what the jurors thought and of their deliberations based on those thoughts. There is no basis in the record for such speculation. We agree with the judge that, there needed to be something from the ultimate . . . purchaser of the service that indeed the services of Bentley would have been the successful ones in the absence of . . . Medicia or the involvement of Mr.

Hart. [And] there simply is no testimony from Medicia or any of its representatives to that effect.

Thus, Bentley could not establish all of the elements necessary to prove the claims for breach of contract, tortious interference with economic advantage, nor breach of the covenant of good faith and fair dealing.

Attorney Fees Pursuant To The SRRA

Bentley argues that the judge erred by awarding Hart attorneys' fees based on the SRRA. We agree.

Pursuant to the provisions of the SRRA, specifically N.J.S.A. 2A:61A-2, which was in effect when Hart filed his complaint in 2006:

When a contract between a principal and a sales representative to solicit wholesale orders is terminated, the commissions and other compensation earned and unpaid through the last day of the contract shall become due and payable within 30 days. When a sales representative is discharged the commissions and other compensation earned and unpaid through the last day of the contract shall become due and payable within seven days.

A sales representative shall receive commissions on goods ordered up to and including the last day of the contract even if accepted by the principal, delivered, and paid for after the end of the agreement. The commissions shall become due and payable within 30 days after payment would have been due under the contract if the contract had not been terminated.

[L. 1990, c. 93, § 2. (emphasis added).]

The attorney fee provision of the Act, then set forth in N.J.S.A. 2A:61A-3, read as follows:

a. A principal who violates or fails to comply with the provisions of section 2 of this act shall be liable to the sales representative for all amounts due the sales representative and all attorney's fees actually and reasonably incurred by the sales representative in the action and court costs.

[L. 1990, c. 93, § 3.]

We conclude that the SRRA is inapplicable here because Hart did not allege that Bentley owed him any commissions "that were due and owing prior to the alleged termination date of the parties' agreement." Hart stipulated that the disputed commissions arose from sales that occurred after his termination.

The judge applied a later version of N.J.S.A. 2A:61A-2, which deleted the provision that it applied to compensation earned and unpaid "through the last day of the contract." The complaint was filed prior to the amendment's effective date. The judge erred in applying it retroactively.

We owe no deference to a trial court's interpretation of a statute. Zabilowicz v. Kelsey, 200 N.J. 507, 512 (2009). Here, there was no basis for the court's examination of the statute's legislative history because the plain language of the statute was clear and unambiguous. Jablonowska v. Suther, 195 N.J. 91, 105 (2008).

PreJudgment Interest

Prejudgment interest is routinely awarded to the prevailing party pursuant to Rule 4:42-11. As a matter of equity, the judge can deny prejudgment interest in tort and non-tort cases. Benevenga v. Digregorio, 325 N.J. Super. 27, 34 (App. Div. 1999), certif. denied, 163 N.J. 79 (2000). However, the suspension of prejudgment interest should be limited to "exceptional cases" and "should be used sparingly." N. Bergen Rex Transport, Inc. v. Trailer Leasing Co., 158 N.J. 561, 575 (1999). Here, the jury found that Bentley breached the contract and awarded damages to Hart. Although Hart also breached, the jury determined that his breach was not material. This is not an exceptional case that warrants the denial of prejudgment interest.

We affirm the dismissal of Bentley's counterclaim and the awards of compensatory damages and prejudgment interest and reverse the award of counsel fees.

20100818

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